80.2K

Verified Solution

Link Copied!

Box Limited produces bottled water. The Board of the Company met recently to discuss how to boost its profitability and market share. The Financial results of Box limited and the Industry leader Stone limited are as follows: Operating Statements for the year ended 31 December, 2020

	Box Ltd	Stone Ltd
	000	000
Revenue	2800	4715
Variable costs	1750	2550
Other costs	500	900
Other costs	550	1265

Summarised Statement of Financial Position as at 31 December, 2020.

	Box Ltd	Stone Ltd
	000	000
Non-Current Assets:
Freehold land and buildings	900	2050
Plant and equipment	780	900
Motor vehicles	650	800
Fixtures and fittings	250	350
	2580	4100
Current Assets /Current Liabilities:
Receivables	200	300
Cash	100	250
Inventory	200	150
Payables	(300)	(250)
	200	450
	2780	4550
Finance By:
Ordinary share capital	2000	2000
Reserves	280	350
Non-current liabilities	500	2200
	2780	4550

Required: a. Compute the following performance indices for both companies: i. Profit margin ii. Asset turnover iii. Return on Capital Employed (ROCE) iv. Current ratio v. Debt equity ratio

b. Compare and analyse the performance of the two companies computed in (a) above and explain what the board of Box Limited needs to do to achieve their objective .

c. Which other non-financial measures can influence the decision of the board of Box Limited?

Answer & Explanation Solved by verified expert

See Answer